ab2 January 2024Global Research and Evidence LabChina A-Share Style Guide2023 ended with another rally in ValueWhat is the current investing environment?Macro drivers' explanatory power rebounded in December as the impact of crude oil increased from 1% to 6%. Pair-wise correlations across the equity market continued to fall, while cross-sectional volatility remained relatively flat. We think these trends reflect a lower level of price co-movement and reasonable stock opportunities.What is the market's valuation?China's A-share market valuation slightly decreased to 11.3x 12-month forward PE in December. From a sector perspective, healthcare and IT valuations remained high compared with other sectors. Financials and energy remained at historically low valuations.What is working?In December 2023, Value factors demonstrated another notable rebound compared to that in November. Almost all sub-factors posted positive returns on a long-short basis, with 12-month forward Earnings Yield FS up 3.2%, ranking at the top among all factors last month. Low Beta also outperformed while Growth and Momentum displayed mixed performance. In 2023, Low Volatility was the best-performing factor of the year, posting a 32% gain, followed by Value factors, with 12-month trailing Book Value Yield gaining 24% over the year. Growth suffered the biggest loss last year, down 14%.Monthly long-short style returns: MSCI China-A Onshore (December 2023)Source: UBS Quantitative Database. Note: Size and sector neutral, cap weighted. Price beta and volatility calculated as low minus highThis report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 12. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.EquitiesChinaQuantitativeCathy Fang, PhDAnalyst cathy.fang@ubs.com +86-21-3866 8891Paul WinterAnalyst paul-j.winter@ubs.com +61-2-9324 2080Oliver Antrobus, CFAAnalyst oliver.antrobus@ubs.com +61-3-9242 6467Luke Brown, CFAAnalyst luke.brown@ubs.com +61-2-9324 3620James CameronAnalyst james-a.cameron@ubs.com +61-2-9324 2074Michael GrayAnalyst michael-f.gray@ubs.com +1-212-713 1313Aaron Guo, CFAAnalyst aaron.guo@ubs.com +852-2971 7705Claire JonesAnalyst claire-c.jones@ubs.com +44-20-7568 1873Ashley ShiAnalyst ashley.shi@ubs.com +61-2-9324 3862Lynce Wang, FRMAnalystS1460522090001 lynce.wang@ubs.com +86-21-3866 8638 China A-Share Style Guide 2 January 2024ab 2China A-Share Style GuideUBS ResearchMarket overviewWhat is driving the markets?Macro factors help provide a top-down view of market drivers. We look at a number of globally relevant macr...
